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Wednesday, 20 July 2016

Asian shares dip, crude oil extends losses

Asian shares slipped on Tuesday as a downturn in crude oil curbed enthusiasm from fresh record highs on Wall Street, prompting investors to take profits on recent market gains.

The subdued mood was expected to extend into European trading, with financial bookmakers at CMC Markets calling Britain's FTSE 100 .FTSE to open 16 points lower, Germany's DAX .GDAXI to open down 32 points, while France's CAC .FCHI was seen down 15 points.

MSCI's broadest index of Asia-Pacific shares outside Japan . was down 0.3 percent, off session lows but still moving away from a nine-month high touched last week which put it into technically overbought territory.

China's yuan steadied against the dollar, a day after slipping below the psychologically important 6.7 level for the first time in more than five years. Still, traders expect downward pressure on the currency to persist.

China stocks were lower, with the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen down 0.7 percent and the Shanghai Composite Index .SSEC down 0.6 percent.

On Monday, the Dow Jones industrial average .DJI and the S&P 500 .SPX both hit new peaks on hopes that declining U.S. corporate earnings are turning around.

"It's hard to maintain consistent optimism when markets attain such high levels, and some profit-taking is natural," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank in Tokyo, who noted that weaker oil prices were taking their toll on related sectors.

Pressure remained on crude oil prices after they settled down more than 1 percent on Monday, as rising stockpiles of crude and refined fuel intensified fears of another major supply glut. [O/R]

Brent crude was 0.2 percent lower at $46.86 a barrel, after shedding 1.4 percent on Monday. U.S. crude was also down 0.2 percent at $45.13, after dropping 1.6 percent overnight, with investors mixed on oil's near-term direction.

"Prices are a bit softer in the Asian trading period - traders and investors are torn which way prices are going to break. It's a knife edge between optimism and pessimism," said Ben Le Brun, market analyst at Sydney's OptionsExpress.

Japan's Nikkei stock index .N225 ended up 1.4 percent, as markets reopened after a public holiday on Monday and responded to a weaker yen.

In the previous week, the benchmark index had gained 9.2 percent to notch its biggest weekly gain since December 2009, helped by Wall Street as well as expectations that the Bank of Japan will deliver further stimulus as early as its next policy meeting later this month.

Japanese policymakers won't go as far as funding government spending through direct debt monetization, but might pursue a mix of aggressive fiscal and monetary expansion to battle deflation, according to sources familiar with the matter.

A failed coup in Turkey had dented risk sentiment and bolstered the perceived safe-haven yen before it ran its course. On Monday, Turkey purged its police force after rounding up thousands of soldiers and called for the United States to hand over a cleric that the Turkish government accuses of being behind the takeover attempt.

The dollar took a step back after climbing to more than three-week highs against the yen. It was last down 0.1 percent at 106.09 yen JPY=, after rising as high as 106.33 earlier in the session, its highest since June 24.

The euro EUR= was steady against the dollar at$1.1074.

The European Central Bank will hold a regular policy meeting on Thursday, its last one before an eight-week summer break. It is not expected to take any additional easing steps.

Instead, ECB President Mario Draghi is likely to appeal to governments to do more to bolster the euro zone economy in the wake of Britain's vote last month to exit the European Union.

Some bond traders believe the ECB might address scarcity of bonds it can buy under its 1.7 trillion euro stimulus program, with more than a half of German bonds now ineligible.

The dollar index .DXY, which gauges the greenback against a basket of currencies, edged slightly higher to 96.584.

Spot gold was slightly down at $1,327.70 an ounce, after dropping as much as 1 percent on Monday.